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Trade Week Analysis 19/08/13

Last week: There were a few good TS signals last week. The TS signal and triangle break on Silver was the best yielding one though at a $3.30 gain (330 pips)! I spent most of the week with my son in hospital. He should be out some time this week….. I hope!

This week: The USD and the EURO indices are both still butting up against major S/R levels in much the same way that they were last week. I discussed this in detail, again, in my post from yesterday found here. I still have two main trains of thought here with the EURO (EURX) and USD (USDX) indices for possible scenarios:

USDX bounces off support and EURX falls: I would expect stocks, risk instruments (E/U, A/U, G/U, Kiwi) and commodities to fall.

USDX falls though support and the EURX breaks up through resistance: I would expect stocks, risk instruments (E/U, A/U, G/U, Kiwi) and commodities to rally.

It does feel like a big move is building. I’ve had a couple of bearish signals form up on the S&P500 (see below) and there have been reports about George Soros shorting this index so, we will see how this evolves. I’m keeping an open mind about the direction of any future move for the time being but will be keenly watching to see which way momentum shifts. Whilst I have strong opinions about which way I think the markets should be heading I continue to try and trade what I see and not what I think.

Stocks and broader market sentiment:

There has been some bearish movement on the S&P500 and I’m continuing to watch here for clues as to any new momentum move. In particular I’m looking out for:

S&P500 daily chart: a break of the daily bull trend line. A ‘Bull Flag’ evolved and price had closed above the previous high (1,685 area). I mentioned last week that I didn’t expect this level to be given up easily and this has been the case this week. Price closed the week below this key level. The daily support trend line is still in place here though and price could pull back to test this as part of any continued overall move upwards. I do note, however, that I have received a TS signal to ‘SHORT’ here on the daily S&P500 chart.

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There has been a very new bearish Tenkan/Kijun cross but these crosses, positioned above the Cloud, are deemed ‘weak’ signals. There was not a lot of bearish following the last signal like this but, still, I’m keeping an eye on it anyway. Price is still above the daily Cloud for the time being.

EURX monthly chart: a break of the monthly support trend line (see monthly chart). Price is getting down very close to this support level now and needs watching.

S&P500 monthly chart: a break of the monthly support trend line (see monthly chart). A break of this support level would suggest to me of a more severe pull back or correction. The look of this ‘market top’ appears quite different to that of the previous two market tops from back in 2000 and 2007. Elliott wave suggest a big correction here though. I am still thinking that the whole number, 1,600 level might be the new floor for this index. The saying that ‘Old resistance becomes new Support’ rings for me a bit here. It would not be at all surprising to see this 1,600 level tested again. It has only been tested once by a monthly candle since the bullish break and I would expect a significant level, such as this, to be tested more than once. Also, the previous candle close highs from back in 2000 and 2007 were down near the 1577/1580 area so it is entirely feasible that price may test this region again as well before any continued move upwards.

E/U: Price was trading within two symmetrical triangles on the monthly/weekly charts. Price broke down from the smaller of these triangles at the start of last week. This move only produced about 80 pips though. Price is still trading under the bear trend line of this smaller triangle. Only one weekly support trend line is intact now and is well below current price action. Price is trading above the Ichimoku Cloud on the daily and just in the top edge of the Cloud on the 4 hr chart which suggests choppiness but with a possible bullish bias. The weekly candle closed as an indecision style ‘spinning top’ candle though. Price closed the week back above the weekly 200 EMA which is a bullish effort. This level has been a significant hurdle for the E/U and, as suspected last week, was tested again during this week.

I’m watching for any new TS signal and the weekly 200 EMA.

E/J: Price broke up from a bullish descending wedge pattern this week but without yielding a new TS signal. Price stalled for most of the week at the key 130 level and monthly pivot. It seems to be waiting there for some divine inspiration! It is worth noting that price closed just a fraction below the key 130 level. Price is now trading just above the Cloud on the daily and on the 4 hr Ichimoku Cloud which is still bullish. The weekly candle closed as a bullish candle.

Take a look at the monthly chart though; this shows rather clearly how the monthly 200 EMA and psychological 130 level have been a major S/R region for price action and how it has struggled there for some time. It is only a matter of time, though, before price will eventually kick away from this congested region. I still see the 140 level as a possible target if bullish sentiment prevails at all. Otherwise, the weekly 200 EMA down at 118 might be the choice.

I’m watching for any new TS signal and the 130 level.

A/U: Price chopped around under the key 0.92 level for much of the week. I still see price action forming up into a bullish ‘Cup & Handle’ pattern here. There is also a bear trend line in play on the daily chart. Price action is currently at the point where it is just under this daily bear trend line, the key 0.92 level and the edge of the ‘handle’ from my ‘Cup & Handle’ pattern. This is a most congested zone indeed!

Price is trading just under the Cloud on the daily but is back above on the 4hr chart which suggests choppiness with a bullish bias. The Aussie could rally further if the USD continues to fall and, also, if Gold continues to rally. The weekly candle closed as an indecision style, long legged Doji candle….join the club here! There was some positive Chinese data released over the w/e. It will be interesting to see how this impacts the AUD.

Any further moves back below the 0.90 level: I don’t see much support until down at the 0.83 level! The 0.83 is the monthly 200 EMA. After that there is the 80 level that is near the 61.8% fib retrace from the last swing low to high level so this isn’t too ridiculous a notion! Any continued pause or pull back with the stock market might see price visit these low levels.

I’m watching the 0.92 level, the daily bear trend line and the ‘Cup & Handle’ pattern…multitasking!

A/J: last week’s bullish reversal ‘hammer’ candle was spot on! Price bounced off the weekly 200 EMA, chopped upwards and eventually scraped back above the 0.89 level this week. The 0.89 area is the 61.8% fib level from the recent swing high to the last swing low, a previous triangle breakout zone and a major S/R level for the A/J. Price had broken out and up from the trading channel during the previous week and had also given a new TS signal. This signal gave up to 200 pips. Price stalled as it hit the 4hr 200 EMA though but closed the week above the key 0.89 and right on top of the monthly pivot. Price is still trading below the Cloud on the daily but above the Cloud on the 4hr time frame suggesting choppiness but with a bullish bias. The weekly candle closed as a bullish candle.

I’m still watching the 0.89 level and for a new TS signal.

G/U: Price started the week trading within a bullish descending broadening wedge pattern. Some good data kicked this bullish move off and price subsequently closed out of this wedge and, also, above a key resistance bear trend line from the weekly chart. Price is trading above the Cloud on the daily and 4hr time frame which is bullish. The weekly candle closed as a bullish candle. Price closed the week just above the 1.56 level and you can see from the weekly chart how significant this 1.56 level has been.

NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.

I’m just watching this pair at the moment.

Kiwi: NZD/USD: Like the Cable, price started the week trading within a bullish descending broadening wedge pattern. Some good data here kicked this bullish move off and price has subsequently closed up out of this wedge and above the key S/R level of 0.80. This move also gave a new TS signal. The daily chart shows how the daily 200 EMA, at the 0.81 area, has helped to keep a lid on price action to date. Price is now trading above the Ichimoku Cloud on the daily and on the 4hr chart which is bullish. As with the A/U, any recovery with risk sentiment might help to boost the Kiwi but a fall in stocks would most likely see the Kiwi fall heavily. The monthly 200 EMA, at around 0.68, would seem to be the next level of support if this pair returns to being bearish. The weekly candle closed as a bullish candle.

I’m watching the 0.80 and the 0.81 levels. There is an open TS signal on this pair.

EUR/AUD: The bearish ‘Head and Shoulder’ pattern continued this week until price ran into the daily support trend line. It is trading above the Cloud on the daily but below the Cloud on the 4hr time frame which suggests further choppiness. The weekly candle closed as a small, indecision style, spinning top candle with price at the monthly pivot and just above the daily support trend line.

I’m just watching this pair at the moment.

The Yen: U/J: Price rallied this week but stalled once it got back up to the 61.8% fib retrace level and 4hr 200 EMA. Price is back above the key S/R level of 0.97 now. The 0.97 level is a key level on the daily chart. The monthly chart, though, shows how the 100 level is a key level there Price is now trading below the Cloud on the daily and hourly time frames but is in the Cloud on the 4hr time frame so action might be choppy /bearish. The weekly candle closed as a small, bullish-coloured ‘inside’ candle. These candles reflect the indecision that is in the market.

I’m watching the 0.97 level.

Silver: Price rallied this week after last week’s triangle break and new TS signal. This signal has given up to $3.30 or 330 pips! The weekly candle closed as a large bullish candle.

The next major support after $20 seems to be down at $15, near the monthly 200 EMA. Silver is trading above the Ichimoku Cloud on the 4hr and daily chart but still below the weekly and monthly charts might be choppy still but with a bullish bias! The next direction for the USD might determine how Silver moves from here though.

Gold: Gold continued with its triangle break and also gave a new TS signal that yielded up to $ 30 or 300 pips. This was a choppy ride though! Price closed the week again above the key $1,300 level. The $1,300 level is the 50% fib pullback from the last swing low to swing high.

The next major support after $1,300 seems to be down at the whole number, $1,000 level and, after that, at $850 in the monthly 200 EMA. The weekly candle closed as a large bullish candle. Gold is trading above the Ichimoku Cloud on the 4hr, daily and monthly chart now but below on the weekly chart so it might also be prone to some further choppiness with a bullish bias. As with Silver, the next move on the USD might determine the fate of Gold.

My horrible week:

I have spent the last 5 days sitting alongside my son who has been in hospital with a collapsed lung. I am actually writing up this blog from the hospital! Thankfully, his lung has finally decided to re-inflate but it took its sweet sorry time! I’ve had my share of hospitals over the last few years and a girlfriend quipped that I should run a ‘hospital blog’ as well as my trading and travel blogs! I’ve kept sane through this (I think) by heading down for beach walks. Sunrise there this morning was spectacular as I listened to some of my son’s playlist here and here. This is our Winter!